EDITOR'S LETTER

Don’t rely on forecasts

There aren’t many sure things in economics, as you might have noticed from all the fudging and fence-sitting economists indulge in. But here’s one – economic forecasts are utterly worthless.

No one – not the International Monetary Fund, not Goldman Sachs, and certainly not the Bank of England – can predict the future with any level of consistency or accuracy. And no one expects them to be able to either.

No one keeps a score sheet or holds forecasters to account – we all know that they have as much validity as a fairground fortune teller, so why bother? Of course, that raises the question – what’s the point of forecasts? And the answer is – not to predict the future, but to justify the actions you take today.

Estate agents find statistics that’ll tell you that prices are going to rise so that you’ll buy a house now. Fund managers will dig back to tell you that the FTSE 100 will be roughly 7% higher in a year’s time – every year – so that you’ll buy stocks.

And Bank of England governor Mark Carney latches on to whatever statistic he can find that will enable him to justify keeping interest rates right where they are until after the next election.

The ‘unreliable boyfriend’, as one MP nicknamed him, has declared that “now is not the time for a rate increase”, despite falling unemployment, rising growth and growing market expectations that rates might even rise in 2014.